Investment Thoughts

I have never written anything on this blog about investment, but there is always a first.  In fact, I have been in the stock markets since my university years.  I have been through the dot com bubbles, 2008 recession, covid and now the 2023 rate hike induced recession.

I am both a short term trader and long term investor.  I love reading investment newsletters, but I had to sift through many to know the good ones.  By no means I am a professional but I would like to share with my reader about my approach who is interested in investing in the stock market.

Disclaimer:  I am not a SEC registered or licensed accountant, fund manager or financial advisor.  All of my comments are my own personal opinions.  You should consult with a qualified financial advisor for advice before taking any investment action.  I am not responsible for any of your gain or loss from your own investment.

  1. Number one goal in investment is preservation of capital.  Keeping what you have is more important than making profit.
  2. Risk management is necessary.  You have to know when to cut loss.  This is one of the hardest thing to achieve because fear of loss is human nature.  Consequently, we tend to “average down” or hold on to losers forever.
  3. Selling too early to lock in profit.  This is the 2nd hardest thing to do.  Let the winners run.
  4. Fundamental and technical analysis are both important.  Fundamental analysis assists you in choosing which sector and company to put your money to work while technical analysis helps you to buy and sell at a favorable time.
  5. Macro trend or big picture trend dominates the market.  “Rising tide lifts all boats”.  One can be more aggressive in a bull market but needs to be defensive in a bear market.  For example, in a commodity bull cycle, you want to invest in mining stocks.
  6. Don’t invest the money that you cannot lose and  I NEVER use margin to short or buy stocks.
  7. Dividend paying stocks from strong companies should be the building blocks of your portfolio
  8. Finally, one strategy that I have back tested multiple times that works well:
    • Research a solid company that you like.  I personally would choose dividend paying companies with a track record of consistent cashflow
    • Using RSI, MACD and EMA indicators, wait for the stock price to drop to your target purchase price and sell out-of-the-money puts
    • If you don’t get called, you get to keep the premium.  If the stock is put to you, you purchase at a desirable price of your choosing
    • Wait for the stocks to rise above your purchase price and sell covered calls
    • Again, if you don’t get called, you get to keep the premium and keep selling covered calls for next month
    • Meanwhile, collect the dividends along the way

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